Slowdown in spending starts to bite

KEY parts of Australia's services sector are being hit by the slowdown in consumer spending.

Figures released by Westpac, the second biggest lender, shows that the well-publicised impact on the retail industry has spread to hotels, the construction industry and the finance and insurance sectors. Cafes and restaurants have suffered as consumers have closed their wallets and concentrated on paying down debt.

Along with hotels, with which they are bracketed, food outlets have incurred one of the biggest jumps in percentage terms in the number of impaired loans and bad debts incurred by Westpac over the 12 months to the end of September this year. The figures cover 14 major sectors of the economy including property, manufacturing and mining.

According to the data released on Friday as part of the bank's compliance with risk and lending rules, Westpac saw impaired loans run up by the hotel and food hospitality sector rise by $71 million to $205 million. It also recorded a small increase - of $5 million to $54 million - in the money it has set aside to cover debts that it may not recover.

Big increases in impaired loans year on year were recorded by construction companies (up $69 million to $180 million) and the finance and insurance industries (a rise of $63 million to $213 million). Westpac has also raised its specific provisions for likely loan losses for those sectors.